Reserve Bank of India Governor Shaktikanta Das on Thursday said that the central bank’s position on crypto remains unchanged and pointed out that the emerging markets cannot take ‘cryptomania’.

Speaking at the Mint’s BFSI Summit and Awards 2024, the RBI Governor said, “Traveling down that path will create huge risks. I don’t think the world or emerging markets can take cryptomania like Tulipmania.”

He further highlighted the role of digital lending and said it has witnessed an exponential rise in recent years with more fintechs entering the lending market, offering innovative lending solutions.

Shaktikanta Das highlighted that as per latest data, after the Reserve Bank issued the digital lending guidelines, there has been an increased confidence of investors in this space and a spur in private equity investments in the fintech lending space.

“After we came out with the digital lending guidelines the data will establish unambiguously that the confidence of private sector investors in the fintech lending sector has gone up, not just anecdotally, but according to actual data. Flow of investments into the fintech space, in particular with reference to digital lending, has really grown and the confidence in our system has gone up,” said Governor Das.

Governor said even though there was confidence in the fintech lending sector there are still few issues, mostly relating to illegal loan apps.

“We have furnished a list to the government. There is active engagement between RBI, government and the ministries concerned for appropriate measures against these apps,” he added.

The guidelines were introduced to ensure orderly growth and protect borrowers following complaints that lending apps were charging usurious interest rates, pursuing aggressive recovery practices, and committing fraud and breach of data privacy.

Speaking on the Indian banking sector, he said it was beset with a host of challenges and problems.

Indian banks were weighed down by a number of non-performing assets while the return on assets and equity were in a negative zone. About 11 banks were under the Reserve Bank’s prompt corrective action as at the end of June 2018. Failure of a major NBFC stoked fear and risk aversion amongst market participants, leading to increased costs of market borrowings, especially for those with perceived asset liability mismatches. Later the Covid 19 also came as a shocker which led to major disruptions across all sectors.

Despite all these headwinds, there has been a gradual and consistent turnaround in the Indian banking system.

It is to be noted that the US securities regulator (SEC) has approved the first US-listed exchange traded funds (ETFs) to track bitcoin, in a watershed for the world’s largest cryptocurrency and the broader crypto industry.

As per the announcement, the SEC has approved 11 applications, including from BlackRock, Ark Investments/21Shares, Fidelity, Invesco and VanEck among others.

Some products are expected to begin trading as early as Thursday, kicking off a fierce competition for market share.